PETER Hain launched a blazing attack on Shadow Chancellor Ed Balls yesterday as Labour divisions on the future of benefits spilled into the open.

The former Wales and Work & Pensions Secretary warned that Mr Balls’ proposals to cut winter fuel payments for higher-rate taxpayers could lead to an American-style system where public services are “for the poor only”.

Mr Balls’ speech was also criticised by the Older People’s Commissioner for Wales and failed to impress Age Cymru.

Plaid Cymru and the Liberal Democrats were also alarmed by his suggestion the cap on housing benefits could be “higher in high-cost housing areas like London, but potentially lower in other parts of the country”.

Neath MP and ex-Welsh Secretary Mr Hain delivered the most stinging critique of his former front-bench colleague, saying: “There are three main problems with Labour’s proposal today to cut winter fuel allowances for higher-rate tax payers. First the money raised is estimated at £100m, which is peanuts in terms of the wider welfare budget let alone total Government spending.

Peter Hain

“Second it begs the question; if winter fuel allowances are to be means-tested then how far does the means-testing go, does it stop at fuel or will TV licences, bus passes and senior railcards come next?

“Third, if middle Britain ceased to benefit from the welfare state through some of the few universal benefits that are left, how can we convince them to fund the larger part of that budget through their taxes?”

Mr Hain asked whether Labour was being “dragooned into accepting Tory-Lib Dem spending plans after the next election.”

Nick Bennett of Community Housing Cymru also expressed concern, saying: “There's a risk that a regional system would just widen existing regional gaps in wealth, house prices and ultimately investment. The UK has the highest regional variations than any other EU member state in terms of GDP.”

Plaid Cymru Treasury spokesman Jonathan Edwards said: “Not only do Labour support a regional social security system, they now seemingly favour a regional cap. This would mean that potentially disabled unemployed people in Wales would receive less social security support than people in London. It's an even more right wing policy than we are getting from the Con-Dems.”